Section 412I | Meaning of “loan”, “peer-to-peer loan” and related terms ^F1

(1)This section applies for the purposes of this Chapter.

(2)“Loan” means a loan of money which—

(a)is made on genuine commercial terms, and

(b)is not part of a scheme or arrangement the main purpose or one of the main purposes of which is to obtain a tax advantage (within the meaning given by section 208 of the FA 2013).

(3)A loan is a “peer-to-peer loan” only if it meets—

(a)Condition A or B, and

(b)Condition C.

(4)Condition A is that the person who made the loan is—

(a)an individual,

(b)a partnership which consists of—

(i)two or three persons, and

(ii)at least one person who is not a body corporate, or

(c)an unincorporated body of persons which—

(i)is not a partnership, and

(ii)consists of at least one person who is not a body corporate.

(5)Condition B is that—

(a)the recipient of the loan is a person within paragraph (a), (b) or (c) of subsection (4), and

(b)the loan is a personal or small loan.

(6)Condition C is that, assuming interest were paid on the loan, the person who made the loan would (except for this Chapter) be liable for income tax charged on the interest.

(7)“Personal loan” means a loan which is not used wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the recipient of the loan.

(8)“Small loan” means a loan of £25,000 or less.